Management ch 08 strategy formulation and implementation

Chapter 8

Strategy Formulation and
Implementation


Strategic Planning


Strategic planning has taken on new importance
in today’s world of globalization, deregulation,
advancing technology, and changing
demographics, and lifestyles

Manager’s Challenge: Nintendo

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Strategy Formulation and
Implementation

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Topics:
Chapter 8



Strategic Management
– Definition
– Components
– Model of Strategic Management Process
– Models of Strategy Formation



Managerial Tools to Implement Strategic Plans

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Thinking Strategically

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

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Answers to the following define an overall direction for the
organization's grand strategy
Where is the organization now?
Where does the organization want to be?
What changes are among competitors?
What courses of action will help us achieve our goals?

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Strategic Management

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

Set of decisions and actions used to implement
strategies that will provide a competitively superior fit
between the organization and its environment so as
to achieve organizational goals



Responsibility = top managers &
chief executive

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Strategic Management
Managers ask such questions as...
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



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What changes and trends are occurring?
Who are our customers?
What products or services should we offer?
How can we offer these products or services most
efficiently?

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Grand Strategy




General plan of major action to achieve long-term
goals
Falls into three general categories
1. Growth
A separate grand
2. Stability
strategy can be
3. Retrenchment
defined for global
operations
Ethical Dilemma: A Great Deal for Whom?

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Grand Strategy: Growth


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Growth can be promoted internally by investing in
expansion or externally by acquiring additional
business divisions
- Internal growth = can include development of new
or changed products
- External growth = typically involves diversification
– businesses related to current product lines or
into new areas

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Grand Strategy: Stability


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Stability, sometimes called a pause strategy, means
that the organization wants
–

to remain the same size or

–

to grow slowly and in a controlled fashion

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Grand Strategy: Retrenchment

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

Retrenchment = the organization goes through a
period of forced decline by either shrinking current
business units or selling off or liquidating entire
businesses



Liquidation = selling off a business nit for the cash
value of the assets, thus terminating its existence



Divestiture = involves selling off of businesses that
no longer seem central to the corporation

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Global Corporate Strategies

Need for Global Integration

High

Low

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Globalization
Strategy

• Treats world as a
single global market
• Standardizes global
products/advertising
strategies

Export
Strategy
•Domestically focused
•Exports a few
domestically produced
products to selected
countries

Transnational
Strategy
• Seeks to balance global

efficiencies and local
responsiveness
• Combines
standardization and
customization for
product/advertising
strategies
Multi-domestic Strategy
• Handles markets
independently for each
country
• Adapts product/advertising
to local tastes and needs

Low Need for National Responsiveness

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High


Global Strategy
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Globalization = product design and advertising
strategies are standardized around the world
Multi-domestic = adapt product and promotion for
each country
Transnational = combine global coordination with
flexibility to meet specific needs in various
countries

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Purpose of Strategy
The plan of action that prescribes
resource allocation and other
activities for dealing with the
environment, achieving a
competitive advantage, that help
the organization attain its goals
Strategies focus on:
● Core competencies
● Developing synergy
● Creating value for customers
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Three Levels of Strategy in Organizations

Corporate-Level Strategy:
What business are we in?

Corporation

Business-Level Strategy:
How do we compete?
Textiles Unit

Chemicals Unit

Auto Parts Unit

Functional-Level Strategy:
How do we support the business-level
strategy?
Finance

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R&D

Manufacturing

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Marketing


Strategic Management Process

Scan External
Environment –
National,
Global
Evaluate
Current
Mission, Goals,
Strategies
Scan Internal
Environment – Core
Competence,
Synergy, Value
Creation

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Identify Strategic
Factors –
Opportunities,
Threats

SWOT

Define new
Mission
Goals, Grand
Strategy

Identify Strategic
Factors –

Strengths,
Weaknesses

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Formulate
Strategy –
Corporate,
Business,
Functional

Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control
systems


Strategy Formulation vs.
Implementation


Strategy Formulation = stage of strategic
management that involves planning and decision
making that lead to the establishment of the
organization’s goals and of a specific strategic plan



Strategy Implementation = stage of strategic
management that involves the use of managerial and
organizational tools to direct resources toward
achieving strategic outcomes
Experiential Exercise: Developing Strategy for a Small Business

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Checklist for Analyzing
Organizational Strengths and Weaknesses
Management and Organization

Marketing

Planning, information,
control systems

Distribution channels
Market share
Advertising efficiency
Customer satisfaction
Product quality
Service reputation

Finance

Sales force turnover
Production

Management quality
Staff quality
Degree of centralization
Organization charts

Profit margin
Debt-equity ratio
Inventory ratio
Return on investment
Credit rating

Human Resources
Employee experience,
education
Union status
Turnover, absenteeism
Work satisfaction
Grievances

Research and Development
Basic applied research
Plant location
Machinery obsolescence Laboratory capabilities
Research programs
Purchasing system

New-product innovations
Quality control
Technology innovations
Productivity/efficiency

Sources: Based on Howard H. Stevenson, “ Defining Corporate Strengths and Weaknesses,” Sloan Management Review 17 (spring 1976), 51-68; and M.L.Kastens,
Long-Range Planning for Your Business (New York: American Management Association, 1976).

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Portfolio Strategy
BCG Matrix


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Mix of business units
and product lines
that fit together in a
logical way to
provide synergy and
competitive
advantage

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Five Forces Affecting Industry Competition
•Internet reduces
barriers to entry

Potential New
Entrants
Internet blurs differences among
competitors in an industry

Threat of Substitute
Products
•Internet expands market size, but
creates new substitution threats

•Internet tends to increase the
bargaining power of suppliers

Bargaining
Power of
Buyers

Rivalry
among
Competitors

•Internet shifts greater power
to end consumers

Bargaining Power of Suppliers

Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

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Competitive Edge Through
Competitive Strategies

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

Differentiation = attempt to distinguish products or
services from that of competitors



Cost leadership = aggressively seeks efficient facilities,
pursues cost reductions, and uses tight cost controls to
produce products more efficiently than competitors



Focus = concentrates on a specific regional market or
buyer group

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Continuum of Partnership Strategies
Organizational Combination

Acquisitions

Degree of Collaboration

Mergers

Strategic
Alliances

Joint Ventures

Strategic Business Partnering

Preferred Supplier Arrangements
Low

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Degree of Collaboration

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High


Implementing Strategy Tools


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Leadership
Structural design
Information and control systems
Human resources

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Tools for Putting
Strategy into Action

Environment
Organization

Strategy

Leadership
 Persuasion

Motivation

Structural Design
Culture/values

Human Resources
 Organization Chart

 Teams
Recruitment/selection


Centralization
Transfers/promotions
Decentralization,
 Training
 Facilities, task design
 Systems
Layoffs/recalls
Information and Control

Performance

 Pay, reward system
 Budget allocations

Information systems
 Rules/procedures

Source: Adapted from Jay R. Galbraith and Robert K. Kazanjian, strategy Implementation: Structure, Systems and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115,
Used with permission.

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